X-Post Credit Question

So DH and I are hopefully going to be looking for a house around this time next year. We're going to try for a baby towards the end of this year. We are in an apt right now and hopefully, house prices and interest rates will remain low.

I have some debt to pay off, which will most likely take the rest of the year, if not early into next year.

I know lenders look at debt to income ratio. So my question is how long does my debt (really credit cards) need to be clear for me to get the best rate possible? For example, if everything is paid off in January and I start looking in February, is that enough time to be debt free to get the best interest rate or does there need to be more time?

Not sure if I've explained this very well, but I would appreciate any info. Thanks!

Re: X-Post Credit Question

As far as your debt-to-income ratio, once a debt is paid of, it's paid off! It doesn't matter if it was paid off last month or last year. It will immediately impact your debt to income ratio.

Your credit is also a big component of qualifying for a mortgage. As far as your FICO score, it changes minute by minute. So again, if you pay off a debt, it "should" be reflected right away in your credit report and FICO score. There is no waiting period before your score will improve. But you should check to make sure that was accurately reported so it's reflected on your credit report. There are a lot of instances where inaccurate or out of date info shows up on people's credit reports, so you want to make sure everything is up to date when you want to qualify for a mortgage.

Hope this helps!

Re: X-Post Credit Question

You can get one free credit report from here every year: https://www.annualcreditreport.com/cra/index.jsp

It's a legit site, set up by the 3 main credit agencies, at the gov'ts request. They won't give your FICO score for free, but you can see any negative marks, and get a good idea of what your score is.

Re: X-Post Credit Question

And just to add - some sites that offer free credit reports often give you your credit score (different than you FICO score). I believe the difference is that your credit score only takes into account the last 2 years of activity, whereas your FICO score goes back 7 years.

Banks/mortgage lenders are going to be looking at your FICO score, and whatever is reflected in that 7 year period. More recent activity obviously has a larger impact on the score, though.

Re: X-Post Credit Question

Thanks for the replies.

Christine - it makes me feel better that credit score appears to be updated quickly. I think my fear is there would be lag between updating and needing a good number for best interest rate ona mortgage. I'm really well versed in the logisitcs, but it's these details that I'm not sure about. Thanks.